“This notion that ‘we have oil’ is a gross misrepresentation of what it cost to get a bbl of oil out of the ground to the point of sale—not to mention that the price you see quoted via international media is not what our oil sells for…”
The following Letter to the Editor on the Petrotrin dilemma was submitted to Wired868 by oil and gas management consultant, Antonio D Ross:
Petrotrin is an IOC (Integrated Oil Company) whose main source of revenue is from oil produced and sold. To produce oil, you first have to find it (seismic, drill), produce it (production equipment and facilities), store it (pipelines, storage tanks), process it (separate the water from the oil) and then sell it to a refinery (more pipelines and tanks).
For the purpose of simplifying this discussion, I deliberately left out a few steps as well as the many steps within those steps listed in the processes (find, produce, store, process). This notion that “we have oil” is a gross misrepresentation of what it cost to get a bbl of oil out of the ground to the point of sale—not to mention that the price you see quoted via international media is not what our oil sells for.
To find, produce, store and process oil costs hundreds of millions of dollars. The truth is, those two balloon payments of (USD 850ml and 750 ml) is the least of Petrotrin’s—and, by extension, Trinidad and Tobago’s—worries.
Oil and gas is a high upfront cost business; hence the reason why multinational IOCs (BP, Shell, Exxon, etc) are sometimes the only ones willing and able to take on the high financial risk to access reserves (see Guyana as a recent example) that may sometimes turn out to be dry holes.
With those two balloon payments looming on the horizon, Petrotrin will not have access to capital to do what is necessary to increase its production and reserves in order to finance its international debt obligations as well as its obligations to you as a citizen to Trinidad and Tobago.
The current Petrotrin situation is one of high refinery and other equipment maintenance cost, high and escalating wage bill, large debts, operational inefficiencies, management inefficiencies and poor governance structure, and is a waste of the future generation’s patrimony.
I am 100% in agreement with the government on position of:
- Shutting down the refinery;
- Paying off all the workers and the associated accumulated financial liability;
- Restructuring the company with a rigid hiring process to maximise efficiency;
- Invest in finding more reserves to grow its production in order to maximise revenue.
I would support the government negotiating with any perspective buyer who would come forward and take on the refinery at a fair price (with no incentives).
We don’t have unlimited oil and gas in the ground so we must maximise the value while we can and look to a future of producing high value goods and people because that is our greatest asset.